“When you have high unemployment and a lot of underutilized capacity, the idea is you cut public budgets? That’s insane. Because that leads to a shrinking of the entire economy, when the real problem is … the ratio of debt to the size of the economy overall,” the former secretary of Labor in the Clinton administration says about the backwardness of the budget cuts being imposed by leaders on both sides of the Atlantic. “If you shrink the economy, that ratio becomes worse and worse. That’s an austerity trap. That’s what happened to Spain. It’s what’s happening even to Britain. It’s what’s happening to Europe as a whole. Angela Merkel is absolutely wrong. You need jobs and growth first, before you embrace austerity.
“Now we’re gonna come to exactly the same decision point in January, because we’ve got these sequestration cuts coming up. If nothing is done between now and then, we are going to be forced to embrace our own version of austerity economics at a time when there is still going to be high unemployment and still a lot of underutilized capacity in the United States. We have got to understand ... that jobs and growth have to come first before so-called fiscal austerity discipline.”
Reich continues on “Democracy Now!,” where he touches on Occupy Wall Street’s role in an economic revival. —ARK